Whenever we see the word ‘Microsoft,’ the image of Bill Gates forms in our brains. They are so inseparable that we hardly remember that the co-founder of Microsoft is no longer the CEO of this company. He stepped down from his post, handing the responsibility to Steve Ballmer. That, too, happened two decades ago. Time sure flies very fast. The company has come a long way after. The power shift occurred again in 2014 as Ballmer stepped down and Satya Nadella assumed the role.
For almost half a century, Microsoft’s journey can be divided into three eras. Microsoft’s founding and early growth from 1975 to 2000 is the Bill Gates era, 2000 to 2014 is the Ballmer era, and 2014 to present is the Nadella era.
We all know how Bill Gates and his co-founder Paul Allen built the software giant from the ground, introducing MS-DOS and Windows. Microsoft faced increasing scrutiny, legal challenges, and multiple successes. The antitrust lawsuit was filed in 1990. The situation was handled through a leadership transition in 2000. Microsoft’s succession plan was already present, following which Ballmer became the new CEO. From there on, Microsoft faced a decline in the market for the first time in a long while, and Nadella turned around the slow and gradual decline. So what went wrong in Ballmer’s tenure? What challenges were faced? And finally, what was Nadella’s game-changer?
Ballmer’s leadership was highly criticized for a few things. The most notable one was Microsoft’s delayed entry into the mobile market. In the early 2000s, the mobile market was evolving rapidly. Competitor companies like Apple and Google entered the market very soon and made significant profits. On the contrary, Microsoft made a mistake in recognizing the potential of mobile devices and, as a result, missed the opportunity to enter the market at the right time.
Windows Vista was the successor of Windows XP. It was released under the leadership of Ballmer. It had performance issues. People criticized Windows Vista for its lack of innovation and compatibility concerns. This made a dent in Microsoft’s reputation.
There were a few high-profile acquisitions under the leadership of Ballmer, which were deemed unsuccessful. The acquisition of Nokia (phone business) in 2014 and the failure of Bing in the competition with the Google search engine cost Microsoft significant assets with expected results.
For some reason, Ballmer resisted open-source software and cloud computing. The industry shifted to cloud-based services while Microsoft was still making traditional software. The same thing about entering the Mobile market happened here. The delayed entry into the emerging industry slowed Microsoft’s process adaptation.
Google’s dominance in the online search and service market, lack of profit probability in the XBOX division, and lack of agility and inability to change with the rapidly changing market dynamics put Microsoft on the list of dying companies. The co-founder of Silicon Valley, Paul Graham, posted a blog titled ‘Microsoft is Dead’ in 2007. Apple lost the world’s most valuable publicly traded company’s position. Finally, in 2014, Steve Ballmer was replaced by Satya Nadella. Before we talk about the challenges Nadella faced and how he overcame those, let’s have a look at Microsoft’s annual revenue from 2001 to 2023.
Statistics speaks of the pivotal role of Nadella in Microsoft’s history. The astounding revenue turnaround brought Microsoft back to its feet and transformed it into a leading force in the tech industry.
First, let us analyze the situation that prevailed when Nadella became the chief executive officer. At that time, there was a spike in the mobile phone market. As a result, Microsoft’s PC sales declined rapidly. To tackle the situation, one of the first strategies adopted by Nadella was a “cloud-first, mobile-first” approach. He recognized the importance of cloud computing services, analyzing the increasing use of mobile phones. So, he diverted Microsoft’s focus toward cloud computing platforms. Such a platform, Azure, received much expansion under the leadership of Nadella. This step diversified Microsoft’s revenue collection and showed that the old player was back in the game.
During Microsoft’s lifespan, many trends have come and faded away. When AI was first discussed, people thought this was a momentary buzz. But Satya Nadella’s expert eyes recognized AI’s potential and future scopes. He claimed that AI will change the infrastructure of traditional software systems and Microsoft itself. For a company struggling to adapt to many coming changes in the tech world, people did not pay much heed to it. Now, we see every word of his coming to reality. All other companies also started in the race for AI, but starting ahead gave Microsoft the leverage.
Nadella was determined for this transition. Investing in OpenAI confirms this determination. On the one hand, OpenAI has a huge launchpad to start, funding, and, of course, customers. On the other hand, Microsoft became the market leader in the field. In 2023, Nadella declared in Microsoft’s annual report, “We are all in on AI .” Nadella was right when he said that AI would be this decade’s significant change-maker in computing.
Microsoft is said to be in the early stage of cloud adoption, yet it already found momentum. According to Nadella, the cloud is a departure from the past era, and with Azure Arc, the cloud infrastructure will get embedded with the physical infrastructure. Quoting directly from Nadella’s comment on AI, “Let’s think about how it can augment everyone in whatever we do. Every knowledge worker will be more creative, expressive, and productive.”
Internet Explorer was a dominant search engine for many years. However, there were multiple criticisms revolving around it regarding slow speed, lack of new features, and some privacy issues. Under the leadership of Nadella, Microsoft Edge was launched in 2015 as the successor to Internet Explorer. Due to the existence of better options like Google Chrome and Mozilla Firefox, it took time for Microsoft Edge to catch the velocity. In 2019, Microsoft announced a major shift by adopting the open-source Chromium engine for Edge. The compatibility issues were solved by doing so, and it got in the same line as Google Chrome.
During Ballmer’s tenure, the focus was more on existing product lines than innovation. This was changed in the post-Ballmer era. Nadella drove innovation in traditional products and evolution in the existing product line. The one-time purchase model of Office 365 was shifted to a subscription-based service. The same thing was done for other productivity tools. This move boosted the recurring revenue rate. This also pleased the customers, who always got the latest updates and features.
Nadella accepted new technology like AI with open arms. Investment in AI research and development helped the company to stay at the forefront. Moreover, Nadella made a strategic acquisition to maintain a presence in the professional and networking side of the industry. The moves taken in this matter are buying LinkedIn in 2016 and GitHub in 2018.
During Ballmer’s tenure, Windows 10 was initially launched. But Nadella improved and refined it further. The improved Windows 10 gave users a seamless experience on PCs, tablets, and smartphones. The success of Windows 10 sealed the deal for Nadella.
Fast forwarding to the present, Satya Nadella successfully made Microsoft a trillion-dollar company. As of August 2023, there are 6 trillion dollar companies, with Apple ($2.8 trillion) ranking top, followed by Microsoft ($2.4 trillion). The soft-spoken Nadella brought back the agility in the company and fulfilled the dream he once hopefully shared.
Safrina Kabir is a final-year Electrical and Electronic Engineering student at the Islamic University of Technology. She is a tech enthusiast and a regular writer in this section for several national newspapers.
safrinakabir@iut-dhaka.edu